Common Mistakes to Avoid in Cryptocurrency Trading

Common Mistakes to Avoid in Cryptocurrency Trading

It will not be an overstatement to say that the latest buzz around is the Most people are taking cryptocurrency as one of the prospective ventures for tomorrow. In the year 2021, Bitcoin price skyrocketed to an all-time high of around $68,000. Even though it dropped after that, the true potential of crypto investment was revealed to the world. However, cryptography, mining, blockchains, etc. all can be quite intimidating to newbies entering the cryptocurrency market for the first time. Besides, many people entering the market often make some common mistakes leading to huge losses. Knowing these mistakes can help you save yourself from doing similar ones and entering the zone where you lose money and eventually lose interest. So here are a few common cryptocurrency trading mistakes to avoid.

Investing All Fortune in Crypto. This is simply a “no-no” deal whether you are investing in the best crypto in the market or the worst. There is an established expert opinion in terms of cryptocurrency investment where according to experts one must invest 5% of his total savings in cryptocurrency. Owing to the extensive unpredictable and highly volatile nature of the crypto market, it is never wise to pour all savings into the crypto market.

Short-Term and Comprehensive Investment in a Single Crypto. Investment or trading both ways, experts always put forth an opinion to hold on to your assets for a long term to profit. Short-term goals may often lead to a few successful gains, but it is never a full proof stake. However, according to crypto experts not only long-term holding can help you to acquire the best benefits but even diversifying your investment can allow you to fetch a better profit.

FOMO. A lot of hikes about any cryptocurrency are created by social media and sometimes beyond its true potential, which is a group of people out of no logic following a sudden trend behind any particular crypto. This leads to the creation of investment fads which ultimately go viral, all thanks to the over flashed social media limelight.

A non-partisan NORC collaborated with the University of Chicago in July 2021 and revealed a report on the influence of social on the cryptocurrency market. As per the report, approximately 24% of cryptocurrency traders initially receive their cryptocurrency information via social media sources, 25% of information is circulated via general trading platforms and 26% is populated by cryptocurrency exchanges.

All information and news being circulated through social media networks cannot be trusted. When it comes to real investments whether traditional or cryptocurrency investments, investors should refer to company websites or white papers for reliable information instead of ornamented ones.

Another instance of a social media cryptocurrency scam was in 2021 when a report of $770 million in losses from crypto-related social media scams was unveiled to the FTC 2021.

Panic Selling. Every coin has two sides, the opposite side of FOMO (fear of missing out) and buying too high which is indeed a part of panic selling. People stepping into the false loop of buying a faddish token that is on the verge of extinction or simply which has a feeble future can be a daunting mistake in cryptocurrency trading.

Extreme Diversification. As explained earlier a common way to plan risk management in cryptocurrency investment is to diversify your investment. That is instead of pouring all your funding to buy a single type of crypto, invest in more than one so that even if one digital currency value falls, you can save your investment with the profits from others. However, even in this respect, many people tend to make the common mistake of over-diversifying. Too many diversified investments in multiple cryptocurrencies can burden you with a too much load of tracking all of them and missing out on some over time and losing grip over the tracking of some. Besides diversified investment also leads to slow growth of investment funds as well.

Understanding the cryptocurrency market may take a bit of time, but it is indeed smart to take time to understand the market, learn from common mistakes which people make and thereby plan your investments better with bitql, and similar reliable platforms.